Lionel Zinsou’s background in politics has proven useful over the past 12 months. The leader of French buyout firm PAI Partners, which he took over from its former leaders in what was widely perceived as a coup, has needed all his skills of persuasion and diplomacy.

Private equity deals are part of the financial sphere… as such, recovery has started

Lionel Zinsou, PAI Partners

After lecturing in economics, Zinsou joined the French civil service, spending two years as an adviser to his former lecturer, French politician Laurent Fabius, who served as prime minister from 1984 to 1986.
Zinsou said this was a common career route in France: “It is the French system – two thirds of people start in the civil service. If they are successful, they will spend time with a minister and then go into industry.”

Politics also runs in the Zinsou family. His uncle was the president of African nation of Benin during the 1960s. As Zinsou’s father is from Benin, he remains a citizen of both countries. With his daughters he has created a foundation for work in Benin and says he “has duties in this part of the world”.

Zinsou took advantage of the changing political climate in the late 1980s when he helped food group Danone expand into eastern Europe following the collapse of the Berlin Wall on his first day as a corporate director in 1989.

So it should have come as little surprise to PAI investors that Zinsou took charge just one year after joining the firm when its two most senior people, chairman and chief executive Dominique Mégret and executive committee member Bertrand Meunier, left unexpectedly.

The event nearly caused the end of the firm’s €5.4bn ($6.9bn) fund. The departures triggered a legal clause preventing the company from making new investments and the timing of the change meant some cash-constrained investors saw an opportunity to get out of commitments they had made to the fund.

This was exacerbated by concerns over Zinsou’s capability to run a buyout firm, given his lack of experience of buying and selling assets.

Zinsou joined PAI from Rothschild. He spent more than 10 years at the bank, where his responsibilities included managing its relationship with PAI. Before that he worked at Danone, where he was chief executive of its subsidiaries in the UK. The experience was good for managing assets but not necessarily for making investment decisions.

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But 100 days of negotiations and an estimated 1,300 meetings and phone calls with PAI investors helped soften their stance on Zinsou. The firm eventually agreed with investors a fund reduction that effectively halved the size of the vehicle and six months later PAI won plaudits at its annual investor meeting. With particular reference to Zinsou, one investor said he was “very humble” and showed “a lot of respect for the investors”.

This approach did not impress everyone. One investor close to the situation criticised Zinsou’s approach of listening too much to investors. He said: “I think he did very well to get investors onside and for his own benefit he handled it well.”

But he added: “The company needs a strong leader and I doubt he is that person. He listens to whatever investors say and it will be impossible for him to please 30 investor characters.

“Every decision he makes he brings back to investors, which will keep them happy in the short term but, in six to nine months, everyone forgets that and if he does not get results it will be a problem.”

In his defence, Zinsou’s supporters say people cannot have it both ways and that it is very difficult to criticise the firm for having good investor relations.

When asked what was the biggest thing the period has taught him, Zinsou said: “One central lesson: our investors are our clients, and our clients are to be put in the centre of the firm.”

Looking to the future, Zinsou believes the private equity industry is poised for a rebound. He said: “Private equity deals are part of the financial sphere. As such, recovery has started: the prospects for M&A, debt markets and initial public offerings are decent. Private equity portfolios are part of the real economy, as such we could experience, as in the current trading, a very contrasted growth.”

Opportunities lie with the buyout firms that are best able to adapt, according to Zinsou. He said: “I believe that private equity is a resilient asset class, but is being renewed: it justifies itself when it unlocks corporate efficiencies by bringing professional management and adequate balance sheet structures.

“It will require permanent adjustments in international culture and experience of [a firm’s] team. Size and breadth of sectoral skills will matter even more for private equity houses.”

Challenges for European companies include coping with fast consolidation and new manufacturing and information technologies, he added.